ET: SBI chief faces Ericsson contempt plea

5 February 2019: Ericsson has filed a contempt of court petition against the State Bank of India (SBI) chairman in the Supreme Court for not fulfilling its assurance of settling Reliance Communications’ dues to the telecom equipment maker as the lead banker.

The Swedish firm has also filed its third contempt petition against RCom chairman Anil Ambani, urging the top court to freeze his personal assets and not allow him to leave the country “for breaching the top court’s orders multiple times,” a person aware of the development said. “As lead banker, SBI is also responsible for ensuring the court’s orders of payment are followed.”

The petition has also sought to add RCom units Reliance Telecom and Reliance Infratel as parties, the person said. SBI was lead banker in RCom’s asset monetisation plan which aimed to bring down Rs 42,000-crore debt by at least Rs 18,000 crore through a wireless assets sale to Reliance Jio Infocomm and land parcel sale to Canadian firm Brookfield.

SBI has previously been a co-petitioner, requesting courts to allow sale of RCom’s assets so lenders can recover their money. SBI and RCom didn’t respond to ET’s emailed queries, while Ericsson declined to comment. The Supreme Court has listed all matters relating to RCom and Ericsson for February 12. Shares of RCom plummeted by 27.95% to close at Rs 5.44 on the BSE on Tuesday, following a 35% fall on Monday.

Sources said Ericsson filed a third contempt petition when RCom decided to file for bankruptcy and a debt resolution programme to sell assets, repay lenders and pare debt in 270 days. Ericsson has interpreted this move as RCom’s way of wriggling out of a courtmandated Rs 550-crore settlement. That is because according to the 2016 bankruptcy rules, operational creditors are not at par with financial creditors, who have the first claim over money coming through insolvency proceedings.

Ericsson had already filed two contempt petitions against Ambani for repeatedly failing to pay the dues despite Supreme Court’s stipulated deadlines of September 30 and December 15. In its last hearing on the earlier contempt petitions, the apex court had directed Ambani to appear in court at the next date of hearing. It’s not clear if Ambani will appear in court on February 12.

Ericsson, which in 2014 signed a seven-year deal to operate and manage RCom’s telecom network, had moved the National Company Law Tribunal (NCLT) last year, seeking bankruptcy proceedings against RCom over Rs 1,000-crore dues. SBI opposed Ericsson’s claims, arguing that 14 public sector banks would lose thousands of crores if insolvency proceedings are admitted. Later, a settlement of Rs 550 crore was reached in National Company Law Appellate Tribunal (NCLAT), subsequently backed by Supreme Court, which saved RCom from insolvency earlier.

The battle between Ericsson and RCom is also being played out in the appellate tribunal. On Monday, RCom approached NCLAT to withdraw its appeal against the May 2018 NCLT order that had admitted bankruptcy proceedings.

The Economic Times reported

Treat us like other members of Essar Steel CoC: Standard Chartered to NCLT

5 February 2019: Reiterating its earlier claims, Standard Chartered Bank (SCB) on Tuesday sought to be treated equally with other members of the insolvent Essar Steel Ltd’s (ESL’s) committee of creditors (CoC) during repayment of dues under ArcelorMittal’s takeover bid.

Alleging that while rest of the 26-odd CoC members were being paid 92 per cent of their dues, SCB told the National Company Law Tribunal’s (NCLT’s) Ahmedabad Bench that it was being discriminated under the bid with only 1.7 per cent of its total claims set to be repaid by the LN Mittal-led company.

SCB’s legal counsel on Tuesday told the two-member Bench, comprising adjudicating authorities Harihar Prakash Chaturvedi and Manorama Kumari, that in the Rs 42,000-crore bid made by ArcelorMittal, CoC members led by State Bank of India (SBI) were being paid the full in principal amount and 40 per cent of interest accrued, totaling roughly Rs 41,900 crore. As against this, SCB, which was being excluded from the CoC and not counted as a secured financial creditor, was getting a paltry Rs 60.71 crore against its total claims worth roughly Rs 3,500 crore, including interest.

Members of the CoC had objected to SCB being declared as a secured financial creditor on the grounds that Essar Steel was neither a direct corporate debtor of SCB nor did it offer any collateral. Essar Steel had defaulted on its guarantee for SCB’s loan to its Mauritius-based subsidiary Essar Steel Offshore Ltd.

SCB’s counsel also alleged that while the CoC meeting on October 22, 2018, was held to discuss the resolution plan submitted by ArcelorMittal, the final plan, including commercial aspects, was only presented on October 23, 2018, minutes before the voting on the plan began.

The CoC also appointed a four-member sub-committee to renegotiate the plan with ArcelorMittal, while keeping SCB in the dark, the latter told NCLT. SCB alleged that as part of the negotiations, the upfront cash component under ArcelorMittal’s bid was brought down to Rs 39,500 crore, with the remaining Rs 2,500 crore being included as working capital claims to be paid later.

“Negotiations between creditors and resolution applicant should be to pay more not less. Instead of increasing the amount,” SCB told NCLT while adding that Rs 2,500 crore was adjusted by bringing down upfront cash payment from Rs 42,000 crore to Rs 39,500 crore. On the other hand, the remaining Rs 2,500 crore as working capital claims were to be paid to creditors by ArcelorMittal.

“The end result is ArcelorMittal benefits by Rs 2,500 crore, which it would otherwise have had to pay over and above the Rs 42,000 crore. The CoC members benefit by getting principal, plus 40 per cent interest, while we get only 1.7 per cent of our principal,” SCB told NCLT.

Further, the allocation of repayment of dues to various creditors under the bid was done by the CoC and not ArcelorMittal, contrary to the Insolvency and Bankruptcy Code (IBC), as well as conditions mentioned in the request for proposal (RFP) invited, SCB told NCLT. “Resolution plan doesn’t give a break up of creditors. Rather, the resolution applicant agreed that CoC will decide who gets what. AM washes his hands, leaving it on CoC, contrary to law (RFP and regulation) which states that resolution applicant has to decide, not CoC,” SCB alleged.

Meanwhile, when asked by the Bench whether this would now result in the plan eventually being quashed and Essar Steel forced into liquidation, SCB told NCLT that there was a possibility of the CoC and ArcelorMittal being asked to rework the bid.

Business Standard reported

BS:Indian Gas fails to furnish files, NCLT orders liquidation of Reid & Taylor

5 January 2019: The Mumbai bench of National Company Law Tribunal (NCLT) on Tuesday ordered the liquidation of the debt ridden Reid & Taylor after the new investor, Indian Gas, failed to furnish documents that prove its net worth is over Rs 50 crore.

However, the investor was ready to pay Rs 2 crore non-refundable earnest deposit money as was asked by the tribunal to set in motion the process of providing a resolution plan for the company.

Although an investor from the United States named Phoenix GBL offered to take over the company, the bench presided over by Bhaskara Pantula Mohan and V Nallasenapathy remarked that they are not going to waste any further time as they have already entertained four –five bids which failed to make any progress.

The tribunal also asked the registrar and the resolution professional to put in their best efforts to ensure that the company is sold as a going concern to protect the interest of the workers.

Earlier, Gujarat based CFM Asset Reconstruction and Hong Kong based SPGP holdings had submitted their respective bids to take over the company but they failed to either meet the requirements of the tribunal or did not show interest in providing a resolution plan for the debt ridden company.

In December 2018, the committee of creditors had moved for liquidation of the company but the tribunal stalled the liquidation process and gave extra eleven days for corporate insolvency resolution process after the 270-day time period for a resolution proposal of the company expired.

Finquest Financial Services, Union Bank of India, Punjab National Bank, IL&FS Financial Services, IDBI Bank and L&T Finance are the lenders who have an exposure to the debt ridden Reid & Taylor.

Business Standard reported

ET: Suzlon shares pare losses after 43% plunge on firm’s clarification

5 February 2019: Shares of Suzlon Energy wiped off some losses after it clarifies that the rumours about the company were baseless.

The company also appealed to the investors and stakeholders to not to believe in the same.

The scrip plunged as much as 43 per cent to Rs 2.70 during the day against the previous close of Rs 4.73. However, shares of the company pared some losses and closed 23.26 per cent down at Rs 3.63 . The BSE Sensex closed up 34.07 points, or 0.09 per cent, at 36,616.81 at around the same time.

In a BSE filing, Suzlon said, “We wish to clarify that the company is regular in servicing its debt obligations including servicing obligations towards banks and others for the month of January 2019.”

“We are currently under silent period for declaration of financial results for the quarter ended December 2018 and hence cannot comment further; however wish to submit that the company is committed towards compliance of the listing regulations and would ensure necessary disclosures as and when applicable,” it said.

In a separate BSE filing, the company clarified that none of the shares of the promoters held in the company have been invoked. Further, the promoters’ shareholding in the company has been pledged for collaterally securing the obligations of the lenders of the company and not towards securing promoters’ personal borrowings. And the said pledge too is not mark-to-market.

The company is slated to announce its financial results on February 7.

The Economic Times reported

 

HBL: NCLT Chennai approves Bafna Pharmaceuticals’ corporate insolvency resolution plan

5 February 2019: City-based Bafna Pharmaceuticals today announced that Chennai bench of National Company Law Tribunal (NCLT) has approved the resolution plan submitted by the company under corporate insolvency resolution process.

In an exchange filing, the company said the Chenai bench of the tribunal, by its order dated February 1, 2019, has approved the resolution plan submitted by resolution applicant Bafna Mahaveer Chand.

The resolution plan approved by Committee of Creditors (CoC) on January 4, 2019 was submitted to the NCLT Chennai on January 17 by Resolution Professional (RP) Radhakrishnan Dharmarajan, the company’s statement said.

In July 2018, NCLT admitted the creditor Aries’ application and initiated corporate insolvency resolution process against debtor, Bafna under Insolvency and Bankruptcy Code 2016.

MSME tag

Subsequently, the CoCs in its meeting on September 27 and November 30, 2018 decided to allow the corporate debtor to submit the resolution plan and deferred the issuance of Expression of Interest (EOI) considering that it is an Micro, Small and Medium Enterprise (MSME).

Upon request from Bafna, the CoCs in its meeting dated December 20, 2018 extended the deadline to submit the resolution plan till January 4, 2019.

The resolution plan submitted by Bafna at the sixth meeting of CoCs held on January 4 was approved with 74.84 per cent financial creditors voting in favour of the resolution plan.

The plan provides resolution for all the financial creditors of ₹34.46 crore against a total claim of ₹49.23 crore.

The resolution plan also provides that 70 per cent of the admitted claims of all the financial creditors shall be paid within three months from the ‘approval date’ as full and final settlement of the dues and personal guarantees.

The approved resolution plan shall become effective from February 1.

The Hindu BusinessLine reported

BTVI: Moody’s Downgrades Bharti Airtel Credit Rating To ‘Ba1’; Outlook Negative

5 February 2019: Moody’s Investors Service on Tuesday downgraded the credit rating of telecom operator Bharti Airtel and the backed senior unsecured notes issued by the telco’s Africa arm on account of uncertainty around the company’s profitability, cash flow situations and debt levels.

“Moody’s Investors Service (“Moody’s”) has downgraded to Ba1 from Baa3 the senior unsecured rating for Bharti Airtel Ltd. (Bharti) as well as the backed senior unsecured notes issued by Bharti’s wholly-owned subsidiary, Bharti Airtel Int’l (Netherlands) B.V.,” the agency said in statement.

Credit ratings reflect the company’s calibre to repay debt and raise funds. Ratings range between Aaa, which means best, to lowest category C.

Ba1 rating means obligations are judged to have speculative elements and are subject to substantial credit risk, but have a superior ability to repay short-term debt obligations.

“At the same time, Moody’s has assigned a Ba1 corporate family rating (CFR) to Bharti and withdrawn the company’s Baa3 issuer rating. The ratings outlook is negative,” Moody’s report said.

The negative outlook indicates possibility of further downgrade of rating.

“The downgrade reflects uncertainty as to whether or not the company’s profitability, cash flow situation and debt levels can improve sustainably and materially, given the competitive dynamics in the Indian telco market,” Moody’s Vice President and Senior Credit Officer, Annalisa DiChiara said.

The report said that Bharti Airtel reported EBITDA (cash flow indicator) of Rs 26,500 crore for the 12 months ending December 31, representing a 15.5 per cent year over-year contraction and the profitability of its core Indian mobile segment — which contributes around 37 per cent of EBITDA – remained low, generating just Rs 9,800 crore over the same period.

Bharti Airtel, last week, reported a 72 per cent drop in consolidated net income for the three months ended December 2018 at about Rs 86 crore, amid market turbulence triggered by cut-throat competition in India business.

Change in accounting structure with respect to Airtel Payments Bank brought an exceptional gain of Rs 1,017 crore for Bharti Airtel and bolstered the company’s financials.

“After accounting for gain of Rs 1,017 crore towards exceptional items (net of tax), the resultant net income for the quarter ended December 31, 2018, came in at Rs 86.2 crore,” Airtel said in a statement.

Its net income stood at Rs 306 crore in the same period of the previous year.

While rival Reliance Jio posted a 22 per cent rise in profit at Rs 831 crore on a year-on-year basis in the home turf, Airtel’s losses from India operations (before exceptional items) stood at Rs 971.9 crore, compared to a net income of Rs 373.5 crore in the year ago period.

Among telecom service business arm, only Airtel Africa recorded increase in the profit.

Moody’s, BTVI reported

ET: IL&FS companies to be grouped on payment ability

5 February 2019: The National Company Law Appellate Tribunal has asked the government and IL&FS to provide a list of group companies that have the ability to meet payment obligations in the next 12 months.

In what would lead to immediate repayment of Rs 7,000 crore, the new board of IL&FS proposed final resolution plan to split the group companies into three categories based on 12 months’ solvency and cash flow.

“We cannot allow banks to suffer,” said a two-judge bench led by Justice SJ Mukhopadhaya. The bench suggested that companies under the “green” category should not be put under moratorium and companies in the “amber” category should “at least provide payments to the secured creditors.”

The bench asked the counsel for the government and IL&FS to propose a resolution for companies under the “red” category, which indicates that these companies are not even able to make payments which the senior secured financial creditors adding, “This is how we intend to go in this matter.” According to the IL&FS resolution framework report accessed by ET, “Green”, “Amber” and “Red” are categories of companies based on their ability to meet payment obligations over the next 12 months. Companies that are able to pay all payment obligations are “green”, companies only able to meet operational payments and senior secured debt obligations are “amber” and those that are unable to meet obligations to even senior secured financial creditors are categorised as “red”. According to the plan, IL&FS can service up to Rs 7,000 crore immediately.

“The resolution plan submitted to NCLAT by the Uday Kotak-led board confirms and assures that the seniority of SPV’s project lenders will be maintained during asset monetisation and these project lenders will get utmost priority similar to the waterfall under section 53 of the IBC,” said a creditor present at the hearing. “This development will bring a lot of reprieve to the project lenders of these SPVs and its stakeholders.” Under Section 53 of IBC, senior secured creditors loans are cleared first and any surplus that remains thereafter is given to unsecured or subordinated creditors and thereafter to the equity owners. The board has put 64 companies in category I. Of these 64 companies, 22 are audited, which can service interest and principal payment of up to Rs 7,000 crore. These includes 2 road SPVs-NKEL and JIICL, seven wind SPVs and six fund management.

“This is a positive development for senior secured creditors of SPVs where cash flows are there,” said a source close to one of the lenders opposing the moratorium.

The government and IL&FS have agreed to the appointment of retired Supreme Court Judge DK Jain as a supervisor for the sale of the assets of the debt-laden group in response to a suggestion by the NCLAT at an earlier date.

IL&FS group companies have an outstanding debt in excess of Rs 91,000 crore. The Mumbai bench of the National Company Law Tribunal superseded the board of IL&FS with government nominated on October 1 last year.

The Economic Times reported

BSE filings: TDSAT upholds RCOM’S petition against DOT

4 February 2019: A Reliance Communications Limited spokesperson said:

1. The Hon’ble Telecom Disputes Settlement and Appellate Tribunal (TDSAT) today upheld Reliance Communications Limited’s (RCOM) petition against the Department of Telecommunications (DoT), challenging DoT’s decision to impose One-Time Spectrum Charge (OTSC) on its contracted CDMA and GSM spectrum resources. Passing this order, TDSAT held that any telecom operator’s spectrum holdings of upto 5 MHz in the CDMA band and upto 6.2 MHz in the GSM band were exempt from any OTSC levies. TDSAT hence set aside the levy of OTSC on RCOM’s said spectrum.

2. TDSAT also directed the DoT to return Reliance Communications’ Bank Guarantee (BG) of Rs 2,000 crore, as per its earlier order passed on 3 July 2018.

Exchange filings

BSE Filings: NCLAT accepts RCOM’S withdrawal appeal – 4 February 2019

4 February 2019: Reliance Communications Limited spokesperson said:

1. Reliance Communications Limited (RCOM) today moved the National Company Law Appellate Tribunal (NCLAT) for withdrawal of its appeal, to pursue the resolution plan through National Company Law Tribunal (NCLT) process.

2. Accepting RCOM’s application for withdrawal of the said appeal, the NCLAT directed Ericsson to file its reply in the matter by 8 February 2019. NCLAT further listed the matter for hearing on 12 February 2019.

3. The Hon’ble NCLAT also prohibited RCOM’s Guarantors and any Third Party from invoking any guarantee, mortgate or any other instrument, without NCLAT’s or Supreme Court’s prior permission.

4. RCOM or any Third Party not to sell, transfer or alienate any of its assets (movable and immoveable), without the NCLAT’s or the Supreme Court’s permission.

Exchange filings